Agents remain positive on sales despite fears the family holiday market could be hit by increased mortgage costs following the latest hike in interest rates.
The Bank of England raised the base rate to 5% last week, with the rate now forecast to hit 6% this year, adding to cost-of-living pressures. Three months ago, rates were forecast to rise no higher than 4.5%.
The rise has yet to impact holiday sales, with agents reporting a slowdown in late bookings but a pick‑up in demand for 2024.
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Welsh miniple Travel House reported a dip in the proportion of summer 2023 sales, from 62% of bookings in May to 55% in June. Head of retail Leanne Williams said: “We’re trying to stay positive on the recent news and hope customers continue to commit to holidays.”
She forecast clients would book further in advance to spread the cost of bookings, arguing: “We’ll need support from operators in bringing out holidays earlier. Then we can offer direct-debit plans.”
The Travel Network Group reported a 10 percentage point fall in the proportion of late sales last week, with summer 2024 bookings making up the shortfall.
Membership services director Stephanie Slark said increased sales of cruise, long-haul and all-inclusive holidays had kept average booking values “high”, but added: “Members believe interest rates will likely impact a segment of the market – young families with children.”
The Advantage Travel Partnership also reported summer demand slowing, with 46% of last week’s bookings for departures in the next 12 weeks but demand for 2024 rising.
Chief commercial officer Kelly Cookes expressed confidence the consortium would finish the summer “significantly ahead” of last year.
“It’s too early to speculate what effect the interest rate rises will have,” she said. “[But] we’ve seen consumers willing to prioritise spending on holidays throughout the cost-of-living crisis. We remain confident this will continue.”
Don Bircham, managing director of Hays Travel North West, reported “no slowdown” and noted: “Increasing interest rates have a positive impact on disposable income for some.”
Idle Travel director Tony Mann argued: “Travel is still riding the crest of the wave that Covid brought. I’m still confident for next year.”
He forecast clients hit by rising mortgage rates would book earlier, use payment plans and change holiday durations.
Pole Travel director Jill Waite agreed, saying: “The last thing people sacrifice is their holiday.”
A YouGov survey of 6,000 UK adults last week – conducted before the rate increase – found 16% “most concerned” about mortgage or rent costs, rising to 25% among 25-49-year-olds.
An earlier YouGov survey, in May, found 61% of UK adults had cut spending and 45% expected their financial situation “to get worse”.
Deloitte UK chief economist Ian Stewart noted the interest rate rise would most affect “people in their 30s, those on lower incomes or those in areas where house prices are highest”.
Stewart pointed out: “Only 30% of UK households have mortgages and 85% of those are on a fixed rate, so the pass-through from the bank rate to higher mortgage costs is gradual.” But he warned: “Without a marked weakening of inflation, things are likely to get worse for UK consumers.”
More: Consumers ‘defying cost-of-living crisis to prioritise holidays’
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